Government, University and Business Linkages
New Horizons in Entrepreneurship series
Edited by Scott Shane
Chapter 3: Creating Innovation Networks Among Manufacturing Firms: How Effective Extension Programs Work
Susan Helper and Marcus Stanley INTRODUCTION Between its most recent peak employment level in 2000 and 2004, the US manufacturing sector lost over 2.5 million jobs. This represents almost one ﬁfth of its pre-recession total. The question of how to stop this catastrophic employment loss is clearly a critical one, but there are no easy answers. Manufacturers are eligible for a variety of general business subsidies; the vast majority of these are tax abatements for locating or expanding an operation in a particular area (Lynch, 2004). These tax incentives, however, do not increase manufacturing efﬁciency. The main federal program for increasing the efﬁciency of manufacturing is the Manufacturing Extension Partnership (MEP). Despite its very low level of funding ($106 million in 2003, or $7 per manufacturing worker), it has been hit hard by budget cuts. Its 2004 appropriation was only $39.6 million.1 There is a lack of consensus on how government could assist manufacturing, or whether such assistance is even really possible. In this chapter, we examine data on a subsector of manufacturing, small and medium-sized (fewer than 500 employees) component manufacturing ﬁrms. Component manufacturers typically sell to other ﬁrms (rather than to consumers) and thus form a key part of the manufacturing supply chain. We are able to characterize these ﬁrms’ strategies in some detail using national data gathered by the Michigan Manufacturing Technology Center’s Performance Benchmarking Service. In the ﬁrst section of this chapter, we describe the sector and some of the data we used to...